Learning Outcome Statements

1. Classification of Cash Flows and Non-Cash Activities

a. compare cash flows from operating, investing, and financing activities and classify cash flow items as relating to one of those three categories given a description of the items;

b. describe how non-cash investing and financing activities are reported;

c. contrast cash flow statements prepared under International Financial Reporting Standards (IFRS) and US generally accepted accounting principles (US GAAP);

2. Preparing the Cash Flow Statement

d. distinguish between the direct and indirect methods of presenting cash from operating activities and describe arguments in favor of each method;

e. describe how the cash flow statement is linked to the income statement and the balance sheet;

f. describe the steps in the preparation of direct and indirect cash flow statements, including how cash flows can be computed using income statement and balance sheet data;

g. convert cash flows from the indirect to direct method;

3. Cash Flow Statement Analysis

h. analyze and interpret both reported and common-size cash flow statements;

i. calculate and interpret free cash flow to the firm, free cash flow to equity, and performance and coverage cash flow ratios.